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Collapsed crypto exchange FTX investigating ‘unauthorized transactions’

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Cryptocurrency exchange FTX drew further turmoil Saturday when it announced it had detected unauthorized trading, with analysts warning that hundreds of millions of dollars in assets had been moved from the platform under “suspicious circumstances.”

FTX is one of the most high-profile crypto blowouts Friday after rival exchange Binance abandoned a proposed bailout deal as traders rushed to withdraw $6 billion from the platform in just 72 hours. filed for bankruptcy.

The exchange’s dramatic downfall has seen 30-year-old founder Sam Bankman-Fried, known for his shorts-and-t-shirts outfit, go from being an icon of crypto success to being the protagonist of the industry’s biggest crash. transformed into

There is also speculation about the whereabouts of Bankman-Fried, who lives in the Bahamas. On Saturday, he told Reuters he was in the Bahamas and denied Twitter speculation that he flew to South America on a private jet.

At least $1 billion in customer funds have disappeared from the platform in the FTX turmoil, sources told Reuters on Friday. Bankman-Fried transferred US$10 billion of his client funds to his trading firm, his Alameda Research, the sources said.

On Saturday, FTX US general counsel Ryne Miller said in a Twitter post that the company’s digital assets will be moved to so-called cold storage to “mitigate the damage should fraudulent transactions be observed.” A new problem has occurred.

Cold storage refers to crypto wallets that are not connected to the internet to protect against hackers.

Hundreds of millions of spills

Blockchain analytics firm Nansen said it saw an outflow of $659 million from FTX International and FTX US in the past 24 hours.

FTX CEO Sam Bankman-Fried is pictured in an undated handout photo. (FTX/Reuters)

Another blockchain analytics firm, Elliptic, said about $473 million worth of crypto assets were “moved from FTX wallets early this morning under suspicious circumstances,” but could not confirm that the tokens had been stolen. .

Cryptocurrency exchange Kraken said, “We can confirm that our team is aware of the identity of the accounts related to the ongoing FTX hack, and we need to work with law enforcement to fully investigate this matter. We promise to make sure we have everything.”

FTX was not immediately available to comment on the leak or Kraken’s statement.

The crash shocked investors and prompted renewed calls to regulate the cryptocurrency sector.

“Things will continue to get worse after the FTX crash,” said Alan Wong, operations manager at the Hong Kong Digital Asset Exchange.

“With an $8 billion gap between liabilities and assets, if FTX were to become insolvent, there would be a domino effect, with a series of FTX-related investors going bankrupt or being forced to sell their assets. In an illiquid bear market, this event will lead to another cryptocurrency depreciation and liquidation of leverage.”

Market impact

Since its launch in 2019, FTX has raised over US$2 billion from top investors including Sequoia, Softbank, BlackRock and Temasek. In January, FTX raised his $400 million from investors, bringing the valuation to his $32 billion.

SoftBank and Sequoia Capital said they would cut their investment in FTX to zero.

Cryptocurrency exchange Coinbase Global will also write off an investment in FTX by its venture arm in 2021, according to people familiar with the matter.

Bitcoin fell below US$16,000 for the first time since 2020 after Binance abandoned a bailout trade on Wednesday.

In Saturday’s trading, it was trading at around US$16,831, down more than 75% from the all-time high of US$69,000 reached last November.

Watch | Lessons Learned from the FTX Collapse:

Ex-regulators complicit in FTX demise

Former commodity regulator CFTC executive Charlie Cooper says the FTX collapse is a good lesson in the dangers inherent in the cryptocurrency industry.

FTX’s token, FTT, plunged about 91% this week. Shares of cryptocurrency and blockchain-related companies also fell.

“With a market cap of $890 billion compared to $41 trillion in U.S. equities, the crypto market is still too small and too siled to spill over into financial markets,” Citi analysts said. I don’t think I can,” he said.

“Over four years, FTX has raised $1.8 billion from venture capital and pension funds. It’s the way.”

In its bankruptcy filing, FTX Trading said it had between $10 billion and $50 billion in assets, $10 billion to $50 billion in liabilities, and more than 100,000 creditors. Restructuring expert John J. Ray III becomes CEO.

U.S. securities regulators are investigating FTX.com’s handling of customer funds and cryptocurrency lending activity amid liquidity strains, sources familiar with the investigation said.

Hedge fund Galois Capital has half of its assets locked in FTX, the Financial Times reported Saturday.

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